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Hutchinson Island convention hotel up for Chatham County vote Friday

Chatham County commissioners are scheduled Friday to consider a potential development agreement for construction of a proposed convention hotel on Hutchinson Island.

A presentation of a recently completed economic and feasibility study of the proposed hotel also will take place.

The economic analysis by Jones Lang LaSalle, which included reviews of previous market studies along with its own recommendations, concluded that a 500-room hotel, with 400 that could be committed for conventions, would generate an economic benefit to the area.

“There is latent demand which would be absorbed only by additional hotel stock with a focus on convention business,” the report stated.

The study found that a predicted return rate of 10 percent to 11 percent would not be enough for a private developer and that the development probably would not be feasible without public financing.

The Lindgren Group, hired by the county to determine the impact on existing hotels, submitted a report in opposition to the project.

Based on interviews with representatives from the Savannah hospitality community, the Lindgren report concluded there was no justification for a public bond-financed hotel in Savannah. Instead, the county may want to consider how funds could be used to improve the Civic Center, the report suggested.

“It’s unfortunate that Savannah has been put into the position of having a Trade Center in the wrong location,” the report said. “Fixing that problem with public funds probably does not make sense.”

Consideration of the non-binding agreement comes after a new commission began its term in January. The previous commission had approved an extension in October of a memorandum of understanding with Hutchinson Hotel Holdings to develop a 500-room hotel as part of the expansion of the Savannah International Trade & Convention Center.

As part of the extension, the commission agreed to spend up to $25,000 for the economic study and feasibility review.

The agreement would enable the county to continue reviewing any potential risks in the proposal, which would include the county issuing up to $50 million in bonds for the hotel’s conference center and parking garage, which Chatham would lease to the private developer.

To pay the annual debt service on the public bonds, the county would rely on the hotel’s lease payments for the publicly owned improvements. The developer has agreed to maintain a $3 million line of credit with the county to cover any shortfall in bond payments if the state does not approve a tourism tax rebate for the project.

In addition to adoption of the agreement, two more steps would remain before any binding decision. Those steps include a definitive agreement with performance guarantees and approval of the bond issuance. Key to completing those steps would be whether the county and developer can complete a checklist of 13 tasks, including an intergovernmental agreement with the city of Savannah and an assurance that Chatham’s bond rating would not be downgraded.